BILL NUMBER: AB 282	CHAPTERED  10/10/99

	CHAPTER   848
	FILED WITH SECRETARY OF STATE   OCTOBER 10, 1999
	APPROVED BY GOVERNOR   OCTOBER 8, 1999
	PASSED THE ASSEMBLY   SEPTEMBER 8, 1999
	PASSED THE SENATE   SEPTEMBER 3, 1999
	AMENDED IN SENATE   AUGUST 31, 1999
	AMENDED IN SENATE   AUGUST 17, 1999
	AMENDED IN SENATE   JUNE 24, 1999
	AMENDED IN ASSEMBLY   APRIL 27, 1999
	AMENDED IN ASSEMBLY   APRIL 15, 1999

INTRODUCED BY   Assembly Member Torlakson

                        FEBRUARY 4, 1999

   An act to amend Sections 129010, 129020, 129035, 129040, 129050,
129055, 129065, 129080, 129090, 129100, 129105, 129173, 129174,
129200, and 129210 of, to add Sections 129045, 129051, 129087,
129092, and 129152 to, to add Article 5.5 (commencing with Section
129220) to Chapter 1 of Part 6 of Division 107 of, to repeal Section
129025 of, and to repeal and add Section 129075 of, the Health and
Safety Code, relating to health facilities.


	LEGISLATIVE COUNSEL'S DIGEST


   AB 282, Torlakson.  Health facility construction loan insurance.
   The existing California Health Facility Construction Loan
Insurance Law provides, without cost to the state, an insurance
program for health facility construction, improvement, and expansion
loans in order to stimulate the flow of private capital into health
facilities construction, improvement, and expansion, and in order to
meet the need for new, expanded, and modernized public and nonprofit
health facilities.  Under existing law, the Office of Statewide
Health Planning and Development has various responsibilities in
connection with this program.
   This bill would revise existing law relating to the provision of
health facility construction loan insurance, including declaring
legislative intent to apply specified existing provisions
retroactively, and requiring the office to develop a state plan and
to outline any changes the plan makes to the health care industry
including statements of the plan's guiding principles.  This bill
would also make certain conditions applicable only to borrowers that
are general acute care hospitals or acute psychiatric hospitals.
This bill would include the conditions under which a loan is eligible
for insurance, and would require the office to develop and implement
a system for assessing an applicant's relative financial risk, and
to establish a maximum level of insurance risk for the projects it
insures.
   This bill would require the office to annually report to the
Legislature the financial status of the program and to develop and
maintain a formal system of monitoring borrowers, to assist the
office in determining when borrowers are experiencing financial
difficulties.  It would also revise existing borrower reporting
requirements, and sanctions applicable to borrowers that are out of
compliance with the existing requirement that the borrower make
reasonable assurances regarding the availability of the facility.
This bill would require the office to perform a feasibility study
upon the application of a borrower for insurance.  The bill would
require the office, in cooperation with the Attorney General, to
develop and maintain a list of receivers, which may be appointed as a
result of a borrower's financial difficulties, and would further
require the office to establish reporting requirements for the
receivers.
   This bill would increase the office's authorization to insure
health facility construction, improvement, and expansion loans to $3
billion, except as specified.
   This bill would set forth the steps to be taken in the event of
specified types of borrower default.  The bill would also require the
office to establish an Advisory Loan Insurance Committee, and would
outline the duties of that committee.


THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:


  SECTION 1.  Section 129010 of the Health and Safety Code is amended
to read:
   129010.  Unless the context otherwise requires, the definitions in
this section govern the construction of this chapter and of Section
32127.2.
   (a) "Bondholder" means the legal owner of a bond or other evidence
of indebtedness issued by a political subdivision or a nonprofit
corporation.
   (b) "Borrower" means a political subdivision or nonprofit
corporation that has secured or intends to secure a loan for the
construction of a health facility.
   (c) "Construction, improvement, or expansion" or "construction,
improvement, and expansion" includes construction of new buildings,
expansion, modernization, renovation, remodeling and alteration of
existing buildings, acquisition of existing buildings or health
facilities, and initial or additional equipping of any of these
buildings.
   In connection therewith, "construction, improvement, or expansion"
or "construction, improvement, and expansion" includes the cost of
construction or acquisition of all structures, including parking
facilities, real or personal property, rights, rights-of-way, the
cost of demolishing or removing any buildings or structures on land
so acquired, including the cost of acquiring any land where the
buildings or structures may be moved, the cost of all machinery and
equipment, financing charges, interest (prior to, during and for a
period after completion of the construction), provisions for working
capital, reserves for principal and interest and for extensions,
enlargements, additions, replacements, renovations and improvements,
cost of engineering, financial and legal services, plans,
specifications, studies, surveys, estimates of cost and of revenues,
administrative expenses, expenses necessary or incident to
determining the feasibility or practicability of constructing or
incident to the construction; or the financing of the construction or
acquisition.
   (d) "Commission" means the California Health Policy and Data
Advisory Commission.
   (e) "Committee" means the Advisory Loan Insurance Committee.
   (f) "Debenture" means any form of written evidence of indebtedness
issued by the State Treasurer pursuant to this chapter, as
authorized by Section 4 of Article XVI of the California
Constitution.
   (g) "Fund" means the Health Facility Construction Loan Insurance
Fund.
   (h) "Health facility" means any facility providing or designed to
provide services for the acute, convalescent, and chronically ill and
impaired, including, but not limited to, public health centers,
community mental health centers, facilities for the developmentally
disabled, nonprofit community care facilities that provide care,
habilitation, rehabilitation or treatment to developmentally disabled
persons, facilities for the treatment of chemical dependency,
including a community care facility, licensed pursuant to Chapter 3
(commencing with Section 1500) of Division 2, a clinic, as defined
pursuant to Chapter 1 (commencing with Section 1200) of Division 2,
an alcoholism recovery facility, defined pursuant to former Section
11834.11, and a structure located adjacent or attached to another
type of health facility and that is used for storage of materials
used in the treatment of chemical dependency, and general
tuberculosis, mental, and other types of hospitals and related
facilities, such as laboratories, outpatient departments, extended
care, nurses' home and training facilities, offices and central
service facilities operated in connection with hospitals, diagnostic
or treatment centers, extended care facilities, nursing homes, and
rehabilitation facilities.  "Health facility" also means an adult day
health center and a multilevel facility.  Except for facilities for
the developmentally disabled, facilities for the treatment of
chemical dependency, or a multilevel facility, or as otherwise
provided in this subdivision, "health facility" does not include any
institution furnishing primarily domiciliary care.
   "Health facility" also means accredited nonprofit work activity
programs as defined in subdivision (e) of Section 19352 and Section
19355 of the Welfare and Institutions Code, and nonprofit community
care facilities as defined in Section 1502, excluding foster family
homes, foster family agencies, adoption agencies, and residential
care facilities for the elderly.
   Unless the context dictates otherwise, "health facility" includes
a political subdivision of the state or nonprofit corporation that
operates a facility included within the definition set forth in this
subdivision.
   (i) "Office" means the Office of Statewide Health Planning and
Development.
   (j) "Lender" means the provider of a loan and its successors and
assigns.
   (k) "Loan" means money or credit advanced for the costs of
construction or expansion of the health facility, and includes both
initial loans and loans secured upon refinancing and may include both
interim, or short-term loans, and long-term loans.  A duly
authorized bond or bond issue, or an installment sale agreement, may
constitute a "loan."
   (l) "Maturity date" means the date that the loan indebtedness
would be extinguished if paid in accordance with periodic payments
provided for by the terms of the loan.
   (m) "Mortgage" means a first mortgage on real estate.  "Mortgage"
includes a first deed of trust.
   (n) "Mortgagee" includes a lender whose loan is secured by a
mortgage.  "Mortgagee" includes a beneficiary of a deed of trust.
   (o) "Mortgagor" includes a borrower, a loan to whom is secured by
a mortgage, and the trustor of a deed of trust.
   (p) "Nonprofit corporation" means any corporation formed under or
subject to the Nonprofit Public Benefit Corporation Law (Part 2
(commencing with Section 5110) of Division 2 of Title 1 of the
Corporations Code) that is organized for the purpose of owning and
operating a health facility and that also meets the requirements of
Section 501(c)(3) of the Internal Revenue Code.
   (q) "Political subdivision" means any city, county, joint powers
entity, local hospital district, or the California Health Facilities
Authority.
   (r) "Project property" means the real property where the health
facility is, or is to be, constructed, improved, or expanded, and
also means the health facility and the initial equipment in that
health facility.
   (s) "Public health facility" means any health facility that is or
will be constructed for and operated and maintained by any city,
county, or local hospital district.
   (t) "Adult day health center" means a facility defined under
subdivision (b) of Section 1570.7, that provides adult day health
care, as defined under subdivision (a) of Section 1570.7.
   (u) "Multilevel facility" means an institutional arrangement where
a residential facility for the elderly is operated as a part of, or
in conjunction with, an intermediate care facility, a skilled nursing
facility, or a general acute care hospital.  "Elderly," for the
purposes of this subdivision, means a person 60 years of age or
older.
   (v) "State plan" means the plan described in Section 129020.
  SEC. 2.  Section 129020 of the Health and Safety Code is amended to
read:
   129020.  The office shall implement the loan insurance program for
the construction, improvement, and expansion of public and nonprofit
corporation health facilities so that, in conjunction with all other
existing facilities, the necessary physical facilities for
furnishing adequate health facility services will be available to all
the people of the state.
   Every odd-numbered year the office shall develop a state plan for
use under this chapter.  The plan shall include an overview of the
changes in the health care industry, an overview of the financial
status of the fund and the loan insurance program implemented by the
office, a statement of the guiding principles of the loan insurance
program, an evaluation of the program's success in meeting its
mission as outlined in Section 129005, a discussion of
administrative, procedural, or statutory changes that may be needed
to improve management of program risks or to ensure the program
effectively addresses the health needs of Californians, and the
priority needs to be addressed by the loan insurance program.
   The health facility construction loan insurance program shall
provide for health facility distribution throughout the state in a
manner that will make all types of health facility services
reasonably accessible to all persons in the state according to the
state plan.
  SEC. 3.  Section 129025 of the Health and Safety Code is repealed.

  SEC. 4.  Section 129035 of the Health and Safety Code is amended to
read:
   129035.  From time to time the office or its designated agent
shall inspect each project for which loan insurance was approved, as
needed, and if the inspection so warrants, the office or agent shall
certify that the work has been performed upon the project, or
purchases have been made, in accordance with the approved plans and
specifications, and that payment of an installment of the loan
proceeds is due to the borrower.  The office shall charge the
borrower a fee for these inspections and certifications, that in no
instance shall exceed four dollars ($4) for each one thousand dollars
($1,000) of the borrower's loan that is insured.  These fees shall
be deposited in the fund.
  SEC. 5.  Section 129040 of the Health and Safety Code is amended to
read:
   129040.  The office shall establish a premium charge for the
insurance of loans under this chapter, and this charge shall be
deposited in the fund. A one-time nonrefundable premium charge shall
be paid at the time the loan is insured.  The premium rate may vary
based upon the assessed level of relative financial risk determined
pursuant to Section 129051, but shall in no event be greater than 3
percent.  The amount of premium shall be computed on the basis of the
application of the rate to the total amount of principal and
interest payable over the term of the loan.  Amendments made to this
section by this bill shall take effect on January 1, 2001.
  SEC. 6.  Section 129045 is added to the Health and Safety Code, to
read:
   129045.  The office shall annually report to the Legislature the
financial status of the program and its insured portfolio, including
the status of all borrowers in each stage of default and the office's
efforts to collect from borrowers that have defaulted on their debt
service payments.
  SEC. 7.  Section 129050 of the Health and Safety Code is amended to
read:
   129050.  A loan shall be eligible for insurance under this chapter
if all of the following conditions are met:
   (a) The loan shall be secured by a first mortgage, first deed of
trust, or other first priority lien on a fee interest of the borrower
and any other security agreement that the office may require subject
only to those conditions, covenants and restrictions, easements,
taxes, and assessments of record approved by the office, and other
liens securing debt insured under this chapter.
   (b) The borrower obtains an American Land Title Association title
insurance policy with the office designated as beneficiary, with
liability equal to the amount of the loan insured under this chapter,
and with additional endorsements that the office may reasonably
require.
   (c) The proceeds of the loan shall be used exclusively for the
construction, improvement, or expansion of the health facility, as
approved by the office under Section 129020.  However, loans insured
pursuant to this chapter may include loans to refinance another prior
loan, whether or not state insured and without regard to the date of
the prior loan, if the office determines that the prior loan would
have been eligible for insurance under this chapter at the time it
was made.  The office may not insure a loan for a health facility
that the office determines is not needed pursuant to subdivision (k).

   (d) The loan shall have a maturity date not exceeding 30 years
from the date of the beginning of amortization of the loan, except as
authorized by subdivision (e), or 75 percent of the office's
estimate of the economic life of the health facility, whichever is
the lesser.
   (e) The loan shall contain complete amortization provisions
requiring periodic payments by the borrower not in excess of its
reasonable ability to pay as determined by the office.  The office
shall permit a reasonable period of time during which the first
payment to amortization may be waived on agreement by the lender and
borrower.  The office may, however, waive the amortization
requirements of this subdivision and of subdivision (g) of this
section when a term loan would be in the borrower's best interest.
   (f) The loan shall bear interest on the amount of the principal
obligation outstanding at any time at a rate, as negotiated by the
borrower and lender, as the office finds necessary to meet the loan
money market.  As used in this chapter, "interest" does not include
premium charges for insurance and service charges if any.  Where a
loan is evidenced by a bond issue of a political subdivision, the
interest thereon may be at any rate the bonds may legally bear.
   (g) The loan shall provide for the application of the borrower's
periodic payments to amortization of the principal of the loan.
   (h) The loan shall contain those terms and provisions with respect
to insurance, repairs, alterations, payment of taxes and
assessments, foreclosure proceedings, anticipation of maturity,
additional and secondary liens, and other matters the office may in
its discretion prescribe.
   (i) The loan shall have a principal obligation not in excess of an
amount equal to 90 percent of the total construction cost.
   (j) The borrower shall offer reasonable assurance that the
services of the health facility will be made available to all persons
residing or employed in the area served by the facility.
   (k) The office has determined that the facility is needed by the
community to provide the specified services.  In making this
determination, the office shall do all of the following:
   (1) Require the applicant to describe the community needs the
facility will meet and provide data and information to substantiate
the stated needs.
   (2) Require the applicant, if appropriate, to demonstrate
participation in the community needs assessment required by Section
127350 of the Health and Safety Code.
   (3) Survey appropriate local officials and organizations to
measure perceived needs and verify the applicant's needs assessment.

   (4) Use any additional available data relating to existing
facilities in the community and their capacity.
   (5) Contact other state and federal departments that provide
funding for the programs proposed by the applicant to obtain those
departments' perspectives regarding the need for the facility.
Additionally, the office shall evaluate the potential effect of
proposed health care reimbursement changes on the facility's
financial feasibility.
   (6) Consider the facility's consistency with the Cal-Mortgage
state plan.
   (l) In the case of acquisitions, a project loan shall be
guaranteed only for transactions not in excess of the fair market
value of the acquisition.
   Fair market value shall be determined, for purposes of this
subdivision, pursuant to the following procedure, that shall be
utilized during the office's review of a loan guarantee application:

   (1) Completion of a property appraisal by an appraisal firm
qualified to make appraisals, as determined by the office, before
closing a loan on the project.
   (2) Evaluation of the appraisal in conjunction with the book value
of the acquisition by the office.  When acquisitions involve
additional construction, the office shall evaluate the proposed
construction to determine that the costs are reasonable for the type
of construction proposed.  In those cases where this procedure
reveals that the cost of acquisition exceeds the current value of a
facility, including improvements, then the acquisition cost shall be
deemed in excess of fair market value.
   (m) Notwithstanding subdivision (i), any loan in the amount of
five million dollars ($5,000,000) or less may be insured up to 95
percent of the total construction cost.
   In determining financial feasibility of projects of counties
pursuant to this section, the office shall take into consideration
any assistance for the project to be provided under Sections 14085.5
and 16715 of the Welfare and Institutions Code or from other sources.
  It is the intent of the Legislature that the office endeavor to
assist counties in whatever ways are possible to arrange loans that
will meet the requirements for insurance prescribed by this section.

   (n) The project's level of financial risk meets the criteria in
Section 129051.
  SEC. 8.  Section 129051 is added to the Health and Safety Code, to
read:
   129051.  (a) The office shall develop and implement a system for
assessing the relative financial risk of the applicant.  The system
shall include, but is not limited to, an assessment of the applicant'
s financial strength, credit history, security for the loan,
cash-flow, and ability to repay the debt.
   (b) The office shall establish a maximum acceptable level of
financial risk for the projects it insures.  The office may only
approve a project if its risk level is below the established maximum,
except as provided in subdivision (c).
   (c) The office may approve a project with a level of insurance
risk that exceeds the established maximum if the office determines
that the project meets a significant community need or will be a sole
community provider.
  SEC. 9.  Section 129055 of the Health and Safety Code is amended to
read:
   129055.  In order to comply with subdivision (j) of Section
129050, any borrower that is certified for reimbursement for cost of
care under Chapter 7 (commencing with Section 14000) of Part 3 of
Division 9 of the Welfare and Institutions Code shall demonstrate
that its facility is used by persons for whom the cost of care is
reimbursed under that chapter, in a proportion that is reasonable
based upon the proportion of Medi-Cal patients in the community
served by the borrower and by persons for whom the costs of care is
reimbursed under Title XVIII of the federal Social Security Act in a
proportion that is reasonable based upon the proportion of Medicare
patients in the community served by the borrower.
   For the purposes of this chapter, the community means the service
areas or patient populations for which the health facility provides
health care services, unless the office determines that, or the
borrower demonstrates to the satisfaction of the office that, a
different definition is more appropriate for the borrower's facility.

  SEC. 10.  Section 129065 of the Health and Safety Code is amended
to read:
   129065.  As part of its assurance under subdivision (j) of Section
129050, any borrower that is a general acute care hospital or acute
psychiatric hospital shall agree to the following actions:
   (a) To advise each person seeking services at the borrower's
facility as to the person's potential eligibility for Medi-Cal and
Medicare benefits or benefits from other governmental third party
payers.
   (b) To make available to the office and to any interested person a
list of physicians with staff privileges at the borrower's facility,
that includes:
   (1) Name.
   (2) Speciality.
   (3) Language spoken.
   (4) Whether takes Medi-Cal and Medicare patients.
   (5) Business address and phone number.
   (c) To inform in writing on a periodic basis all practitioners of
the healing arts having staff privileges in the borrower's facility
as to the existence of the facility's community service obligation.
The required notice to practitioners shall contain a statement, as
follows:
   "This hospital has agreed to provide a community service and to
accept Medi-Cal and Medicare patients.  The administration and
enforcement of this agreement is the responsibility of the Office of
Statewide Health Planning and Development and this facility."
   (d) To post notices in the following form, that shall be
multilingual where the borrower serves a multilingual community, in
appropriate areas within the facility, including but not limited to,
admissions offices, emergency rooms, and business offices:

      NOTICE OF COMMUNITY SERVICE OBLIGATION

   "This facility has agreed to make its services available to all
persons residing or employed in this area.  This facility is
prohibited by law from discriminating against Medi-Cal and Medicare
patients.  Should you believe you may be eligible for Medi-Cal or
Medicare, you should contact our business office (or designated
person or office) for assistance in applying.  You should also
contact our business office (or designated person or office) if you
are in need of a physician to provide you with services at this
facility.  If you believe that you have been refused services at this
facility in violation of the community service obligation you should
inform (designated person or office) and the Office of Statewide
Health Planning and Development."

   The borrower shall provide copies of this notice for posting to
all welfare offices in the county where the borrower's facility is
located.
  SEC. 11.  Section 129075 of the Health and Safety Code is repealed.

  SEC. 12.  Section 129075 is added to the Health and Safety Code, to
read:
   129075.  (a) Each borrower shall provide any reports as may be
required of it by Part 5 (commencing with Section 127675), from which
the office shall determine the borrower's compliance with
subdivision (j) of Section 129050.
   (b) If a report indicates noncompliance with subdivision (j) of
Section 129050, Section 129055, or Section 129065, the office shall
require the borrower to submit a plan detailing the steps and
timetables the borrower will take to bring the facility into
compliance.
   (c) The office shall annually report to the Legislature the extent
of the borrowers' compliance with their community service
obligations pursuant to subdivision (j) of Section 129050, Section
129055, and Section 129065.
  SEC. 13.  Section 129080 of the Health and Safety Code is amended
to read:
   129080.  The office may impose additional appropriate remedies and
sanctions against a borrower when any of the following occurs:
   (a) The office determines that the annual compliance report
required in Section 129075 indicates that the borrower is out of
compliance with subdivision (j) of Section 129050.
   (b) A facility fails to carry out the actions agreed to in a plan
approved by the office pursuant to Section 129070.
   (c) The facility fails to submit compliance reports as required by
Section 129075.  The additional remedies include referring the
violation to the office of Attorney General of California for legal
action authorized under existing law or other remedy at law or
equity.
   However, the remedies obtainable by legal action shall not include
withdrawal or cancellation of the loan insurance provided under this
chapter.
  SEC. 14.  Section 129087 is added to the Health and Safety Code, to
read:
   129087.  The office shall develop and maintain a formal system of
monitoring borrowers, in order to assist the office in detecting at
the earliest possible date those borrowers who are experiencing
financial difficulties.  This system shall include, but shall not be
limited to, all of the following:
   (a) A method of tracking the receipt of information that borrowers
are required by law and regulatory agreement to submit to the
office.
   (b) A process for thoroughly reviewing borrowers' financial
statements, budgets, auditor's management letters, and health
facility utilization trends.
   (c) Timely and structured site visits to insured facilities.
  SEC. 15.  Section 129090 of the Health and Safety Code is amended
to read:
   129090.  Pursuant to this chapter, political subdivisions and
nonprofit corporations may apply for state insurance of needed
construction, improvement, or expansion loans for construction,
remodeling, or acquisition of health facilities to be or already
owned, established, and operated by them as provided in this chapter.
  Applications shall be submitted to the office by the nonprofit
corporation or political subdivision authorized to construct and
operate a health facility.  Each application shall conform to the
requirements of the office, shall be submitted in the manner and form
prescribed by the office, and shall be accompanied by an application
fee of one-half of 1 percent of the amount of the loan applied for,
but in no case shall the application fee exceed five hundred dollars
($500).  The fees shall be deposited by the office in the fund and
used to defray the office's expenditures in the administration of
this chapter.
  SEC. 16.  Section 129092 is added to the Health and Safety Code, to
read:
   129092.  Notwithstanding any other provision of law, upon the
application of a borrower for insurance, the office shall perform a
feasibility study relating to the proposed project, the cost of which
shall be paid by the applicant.  The office may retain independent
consultants and require a deposit from the applicant for such
services, upon submission of the application.  This section shall
take effect on January 1, 2001.
  SEC. 17.  Section 129100 of the Health and Safety Code is amended
to read:
   129100.  Every applicant for insurance shall be afforded an
opportunity for a fair hearing before the commission upon 10 days'
written notice to the applicant.  If the office, after affording
reasonable opportunity for development and presentation of the
application and after receiving the advice of the commission, finds
that an application complies with the requirements of this article
and of Section 129020 and is otherwise in conformity with the state
plan, it may approve the application for insurance.  The office shall
consider and approve applications in the order of relative need set
forth in the state plan in accordance with Section 129020.  Judicial
review of a final decision made under this section may be had by
filing a petition for writ of mandate.  Any petition shall be filed
within 30 days after the date of the final decision of the office.
  SEC. 18.  Section 129105 of the Health and Safety Code is amended
to read:
   129105.  The office may upon application of the borrower insure
any loan that is eligible for insurance under this chapter, and upon
the terms prescribed by the office, may make commitments for the
insuring of the loans prior to their date of execution or
disbursement thereon.  The decision to grant
                 loan insurance upon an application of the borrower
is within the discretion of the director of the office.  Showing need
for the project or meeting the eligibility requirements for loan
insurance and establishing financial feasibility of the project or
recommendation for approval from the committee does not create any
entitlement to loan insurance.
  SEC. 19.  Section 129152 is added to the Health and Safety Code, to
read:
   129152.  If a borrower fails to submit a required report, or upon
any other default of any regulatory or contractual term or covenant,
whether or not a default has been declared, the office first shall
informally communicate with the borrower.  If the borrower fails to
submit the required report or otherwise cure the default, the office
shall issue a formal demand in writing stating the nature of the
default and requiring the borrower to submit a detailed plan of
correction that is acceptable to the office.  If the borrower fails
to either submit a plan, or timely cure the default, the office shall
perform an onsite visit.  If the office determines the borrower is
not making sufficient progress in submitting any required reports or
otherwise curing any default, the office may require the borrower, at
the borrower's expense, to employ an independent consultant or
professional, acceptable to the office, to conduct a program audit.
If the borrower fails to adopt the recommendations of the independent
consultant or professional made in the program audit, or if the
borrower fails to otherwise timely cure the default, the office shall
have all the remedies set forth in the Section 129173.
  SEC. 20.  Section 129173 of the Health and Safety Code is amended
to read:
   129173.  (a) In fulfilling the purposes of this article, as set
forth in Section 129005, and upon making a determination that the
financial status of a borrower may jeopardize a borrower's ability to
fulfill its obligations under any insured loan transaction so as to
threaten the economic interest of the office in the borrower or to
jeopardize the borrower's ability to continue to provide needed
health care services in its community, including, but not limited to,
a declaration of default under any contract related to the
transaction, the borrower missing any payment to its lender, or the
borrower's accounts payable exceeding three months, the office may
assume or direct managerial or financial control of the borrower in
any or all of the following ways:
   (1) The office may supervise and prescribe the activities of the
borrower in the manner and under the terms and conditions as the
office may stipulate in any contract with the borrower.
   (2) Notwithstanding the provisions of the articles of
incorporation or other documents of organization of a nonprofit
corporation borrower, this control may be exercised through the
removal and appointment by the office of members of the governing
body of the borrower sufficient so that the new members constitute a
voting majority of the governing body.
   (3) In the event the borrower is a nonprofit corporation or a
political subdivision, the office may request the Secretary of the
California Health and Human Services Agency to appoint a trustee.
The trustee shall have full and complete authority of the borrower
over the insured project, including all property on which the office
holds a security interest.  No trustee shall be appointed unless
approved by the office.  A trustee appointed by the secretary
pursuant to this subdivision may exercise all the powers of the
officers and directors of the borrower, including the filing of a
petition for bankruptcy. No action at law or in equity may be
maintained by any party against the office or a trustee by reason of
their exercising the powers of the officers and directors of a
borrower pursuant to the direction of, or with the approval of, the
secretary.
   (4) The office may institute any action or proceeding, or the
office may request the Attorney General to institute any action or
proceeding against any borrower, to obtain injunctive or other
equitable relief, including the appointment of a receiver for the
borrower or the borrower's assets, in the superior court in and for
the county in which the assets or a substantial portion of the assets
are located.  The proceeding under this section for injunctive
relief shall conform with the requirements of Chapter 3 (commencing
with Section 525) of Title 7 of Part 2 of the Code of Civil
Procedure, except that the office shall not be required to allege
facts necessary to show lack of adequate remedy at law, or to show
irreparable loss or damage.  Injunctive relief may compel the
borrower, its officers, agents, or employees to perform each and
every provision contained in any regulatory agreement, contract of
insurance, or any other loan closing document to which the borrower
is a party, or any obligation imposed on the borrower by law, and
require the carrying out of any and all covenants and agreements and
the fulfillment of all duties imposed on the borrower by law or those
documents.
   A receiver may be appointed pursuant to Chapter 5 (commencing with
Section 564) of Title 7 of Part 2 of the Code of Civil Procedure.
In cooperation with the Attorney General, the office shall develop
and maintain a list of receivers who have demonstrated experience
both in the health care field and as a receiver.  Upon a proper
showing, the court shall grant the relief provided by law and
requested by the office or the Attorney General.  No receiver shall
be appointed unless approved by the office.  The office shall
establish reporting requirements for receivers to ensure that the
office is fully apprised of all costs incurred and progress made by
the receiver.  A receiver appointed by the superior court pursuant to
this subdivision and Section 564 of the Code of Civil Procedure may,
with the approval of the court, exercise all of the powers of the
officers and directors of the borrower, including the filing of a
petition for bankruptcy.  No action at law or in equity may be
maintained by any party against the office, the Attorney General, or
a receiver by reason of their exercising the powers of the officers
and directors of a borrower pursuant to the order of, or with the
approval of, the superior court.
   (5) The borrower shall inform the office in advance of all
meetings of its governing body.  The borrower shall not exclude the
office from attending any meeting of the borrower's governing body.
   (b) Other than the loan insured under this chapter, the office
shall not be liable for any debt of a borrower, or to a borrower, as
a result of the office asserting its legal remedies against a
borrower insured under this chapter.
   (c) It is the intent of the Legislature that this section is
remedial in nature, and is applicable retroactively to any health
facility construction loans in existence at the time of its
enactment, to the extent that the application of this section does
not unlawfully impair existing contract rights.
  SEC. 21.  Section 129174 of the Health and Safety Code is amended
to read:
   129174.  (a) In the event a borrower has defaulted in making its
payments on the loan insured by the office to the borrower's bond
trustee, at any time thereafter, the office may do both of the
following:
   (1) Defease a portion or all of the bonds or may purchase a
portion or all of the bonds at a private or public sale or on the
open market.  For this purpose, the office may use any funds
available, including, but not limited to, funds in the Health
Facility Construction Loan Insurance Fund, funds that the office may
receive either from settlement or recoveries from lawsuits, funds
from the sale of assets of the borrower, or funds held by the
borrower's bond trustee.  If requested by the office, the Treasurer
shall purchase the bonds on behalf of the office.  Upon the purchase
of any bonds under this section, the office shall direct the borrower'
s bond trustee to cancel the bonds purchased.
   (2) Issue bonds used for the sole purpose of refunding any part or
all of the defaulted bonds, provided that, in the opinion of the
office, there are adequate present value savings to refund all or
part of the defaulted bonds.  If requested by the office, the
Treasurer shall act as the issuer for this purpose.
   (b) For the purposes of this section, "bonds" mean bonds,
certificate of participation, notes, or other evidence of
indebtedness of a loan insured by the office.
  SEC. 22.  Section 129200 of the Health and Safety Code is amended
to read:
   129200.  There is hereby established a Health Facility
Construction Loan Insurance Fund, that shall be used by the office as
a revolving fund for carrying out the provisions and administrative
costs of this chapter. Notwithstanding Section 13340 of the
Government Code, the money in the fund is hereby continuously
appropriated to the office without regard to fiscal years for the
purposes of this chapter.
  SEC. 23.  Section 129210 of the Health and Safety Code is amended
to read:
   129210.  (a) The office's authorization to insure health facility
construction, improvement, and expansion loans under this chapter
shall be limited to a total of not more than three billion dollars
($3,000,000,000).
   (b) Notwithstanding the limitation in subdivision (a), the office
may exceed the specific dollar limitation in either of the following
instances:
   (1) Refinancing a preexisting loan, if the refinancing results in
savings to the health facility and increases the probability that a
loan can be repaid.
   (2) The need for financing results from earthquakes or other
natural disasters.
  SEC. 24.  Article 5.5 (commencing with Section 129220) is added to
Chapter 1 of Part 6 of Division 107 of the Health and Safety Code, to
read:

      Article 5.5.  Advisory Loan Insurance Committee

   129220.  The office shall establish an Advisory Loan Insurance
Committee which shall be comprised of nine members, eight of whom
shall be appointed by the director of the office.  Of the nine
members, seven shall be appointed from outside state government and
two shall be appointed from inside state government.  The Director of
Finance shall appoint one of the members chosen from inside state
government.  The members of the committee shall be qualified in the
field of financial analysis, management, operations, or construction,
improvement, or expansion of health facilities.  Those members
appointed from outside state government shall be reimbursed one
hundred dollars ($100) for each day spent in the performance of
official duties.  All members shall be reimbursed for reasonable and
necessary expenses.
   129221.  The duties of the committee shall include, but not be
limited to, the following:
   (a) The committee shall assist the director of the office in
formulating policy concerning financial analysis, management,
operation, or construction, improvement, or expansion of health
facilities, and shall, at the request of the director of the office,
provide overall policy advice, guidance, and recommendations.  The
committee shall also provide the office with advice and comment on
the state plan prepared pursuant to Section 129020.
   (b) The committee shall also review and analyze the feasibility,
level of financial risk, and community benefit assessments made by
the office on applications submitted for approval.  The committee
shall recommend to the director whether an application should be
approved and whether any conditions should be attached to that
approval.  Loans that are currently insured by the office and
subsequently are refinanced to obtain a lower interest rate or
emergency working capital loans insured pursuant to Section 129091
shall not require the review of the committee.
